Visiting a cryptocurrency mine won’t require a hardhat, but you might need a fan.
Or, as I witnessed when I visited one, a few of them.
Despite being holed up in the dark corner of a basement, it must have been well over 80 degrees Fahrenheit. The amount of constant power coursing through the systems was so great that the temperature in the room had risen dramatically.
The windows had heavy drapes to try and block out any heat, and numerous fans also ran continuously to prevent overheating.
Cryptocurrency’s value has been a bit of a rollercoaster. It recently hit a record high of $63,000 in April, but tanked Wednesday to below $40,000. Despite the volatility, it continues to rise in popularity.
The most recent hit, however, may be one it has trouble overcoming: Its greenness — or lack thereof.
The Cambridge Center for Alternative Finance estimates that Bitcoin (just one popular cryptocurrency) currently consumes 110 Terawatt Hours per year, or 0.55% of global electricity production.
To put that in perspective, that’s the equivalent of entire countries like Sweden or Malaysia.
Elon Musk made headlines last week after announcing Tesla had halted purchases of vehicles with bitcoins. Musk and his commentary on cryptocurrency has dominated headlines, with prices of Dogecoin and other cryptocurrencies skyrocketing.
Musk had previously helped bolster the validity of crypto when he initially announced three months ago that Tesla would be accepting Bitcoin as payment. In a tweet explaining the reversal, he said, “Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment.”
According to the tweet, Tesla won’t be accepting or trading bitcoins until the mining process transitions to sustainable energy.
Ask any cryptocurrency “expert” — a difficult label since crypto hasn’t been around long enough to have enough of a track record to study — and you’ll get a different answer about its future. Those I talked to were adamant that crypto isn’t reliant on its current energy-sucking model and most news coverage about it is riddled with misconceptions.
In a world where industries are constantly being scrutinized and pressured to limit their draw on nonrenewable resources, it’s fair to ask if the crypto industry is using too much energy.
But supporters will tell you that’s the wrong question to be asking altogether.
It seems there are two sides to this coin.
So what exactly is the problem?
Understanding crypto’s energy problem starts with understanding how it works — or why it was so hot in that basement I visited.
The majority of Bitcoin’s energy use comes from its creation, or “mining.” It functions on the blockchain, a database that differs from others because it stores data on blocks that are then chained together.
Blockchain can be used for different types of transactions, like as a ledger for transactions. In the case of Bitcoin, the blockchain is decentralized so no one person has control — all users control it collectively.
Crypto miners are competing to add the latest block to the chain, and they do so by using computers to solve complex mathematical calculations. As more coins are produced, these calculations increase in complexity.
That’s a simplified version of the process, but it explains the need for the room full of computers running round the clock in the “mine” I saw. Its an energy-consumptive process. And the increasingly complex transactions require more powerful computers, hence even greater energy use.
Seventy percent of this digital mining takes place in China, and Beijing recently took the first step toward regulating the process, requiring the city’s data centers to report whether they were involved in Bitcoin or any other crypto mining.
How much energy is it, exactly?
Saying that a monetary system uses as much energy as an entire country certainly sounds alarming — but is it? Crypto investors and miners I talked to were quick to point out that the information needs to be put into context.
Yes, Bitcoin uses a lot of energy. But it uses less energy than 28 other countries, and many fail to account for the value of Bitcoin. Ukraine, which falls right above Bitcoin in the energy rankings, has a GDP of $150 billion. The value of all mined Bitcoin is $940 billion.
The value is what justifies the energy use, according to some crypto advocates. Supporters say it is a small price to pay to escape a centralized monetary system.
The debate over Bitcoin’s energy consumption grows even muddier and more nuanced just from using the term “energy” to describe the supposed waste.
After all, energy itself does not equate to carbon emissions, as there are many different sources and types of energy that Bitcoin uses, making the calculation of carbon emissions difficult.
Mining is extremely competitive — the three miners with experience I was able to talk to were very protective about their operations and the details on how they run. Since miners aren’t particularly forthcoming, estimates on carbon footprints from crypto mining are still just educated guesses.
The one mining operation I saw — which has since ceased — used a large amount of power. How much? The miner told me their highest electricity bill was around $500, but that wasn’t enough to negate a profit from the operation. There’s no doubt this person was using enough power to potentially power their entire block. Yet as concerning as that may seem, crypto mining has to be evaluated on a macro scale for comparison.
One analysis argues that gold mining is 50 times more expensive than digital mining and running the Bitcoin network combined. At one point, just one gold wedding band can produce 20 tons of waste, according to Earthworks.
Another estimate surmises that 30% of Proof of Mining work uses renewable energy, primarily hydroelectricity. Crypto has an environmental impact, but it remains to be seen if that impact is large enough to force change.
A thing of value
I’ll admit, my eyes grew wide and my brow furrowed at the headlines slamming Bitcoin’s energy use. I had been suspicious of its sustainability since I walked out of a basement sweating and needing a cold drink — in the middle of January.
At the time, I wasn’t sure something that still felt so unpredictable and risky was worth the resources. Today, the argument isn’t over Bitcoin’s success. It’s about its value.
That’s the real question that needs to be asked: Is cryptocurrency’s value greater than whatever environmental impact it has?
Advocates claim the value goes beyond a greener future and opportunities for the average person. By allowing people to transfer value seamlessly, it helps those in low-paying jobs retain more of their wages and evade capital control, with some backers saying Bitcoin’s transparency is what makes it more appealing than a traditional bank.
And for those of us who send money to family overseas, doing so with Bitcoin may be easier than attempting to navigate the requirements of Western Union.
On the flip side, detractors say there is still too much unknown about crypto’s stability. Treasury Secretary Janet Yellen said Bitcoin is an “extremely inefficient way of conducting transactions.” She pointed to the energy issue and the volatility meaning potentially large losses for investors.
Critics have been calling out crypto’s potential environmental impact since its inception, but the community hasn’t yet taken any measurable steps toward changing its protocols.
The task isn’t so straightforward.
The currencies don’t have to operate on the current Proof of Work model, but Ethereum, another cryptocurrency, has been trying to move away from the traditional model for years, without much luck. And since one appeal of Bitcoin is that it’s controlled by individuals instead of an institution, experts say its unlikely the change will happen without government intervention or incentivization.
The crypto industry has taken note. An initiative inspired by the Paris Climate Agreement — the Crypto Climate Accord — has committed to reducing Bitcoin’s carbon footprint.
In fact, Bitcoin may be the incentive some renewable sources need to build out their technology. It wouldn’t be surprising to see Bitcoin and other cryptocurrencies move toward renewable energies like solar as those sources expand and become more efficient.
There are certainly two sides to the Bitcoin energy debate. It remains to be seen if it can win back Elon Musk’s — and the public’s — support.